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When Are You Required to Issue a 1099?

With tax season just around the corner, you’re probably figuring out which forms you need to file. According to the IRS, “If you made or received a payment during the calendar year as a small business or self-employed (individual), you are most likely required to file an information return to the IRS.” Keep reading to see if you do, in fact, need to file Form 1099 for the 2018 tax year.

We will discuss the following three scenarios and how it relates to filing/reporting:

You made a payment

You received a payment

You are not required to file information returns

You made a payment

Payments in the course of your trade or business warrant the filing of 1099-MISC. In short, this form is used to report payments made to contractors by business entities. Keep in mind that rent, royalty, prizes, and monetary awards must be reported on 1099-MISC forms.

Businesses are required to file such forms for each person to whom they have paid during the year. Not only should a business provide a statement to the recipient to whom the payment is made, but they must file the form with the IRS as well. One final note regarding Form 1099-MISC is that medical/healthcare payments and attorneys’ fees must be reported.

While 1099-MISC might be the most commonly known form for those who made a payment, there are certainly others worth knowing about. Take 1099-INT, for example. If you paid interest on a business debt to someone (excluding interest on an obligation issued by an individual), then you will need to complete this tax form.

Form 1099-DIV, meanwhile, accounts for dividends or other distributions to a company shareholder. Then there’s Form 1099-R, which entails the distribution from a retirement or profit plan or from an insurance contract or an IRA. The last piece of documentation worth mentioning in this section is Form 1099-K, which involves payments to merchants or other entities in the settlement of reportable payment transactions or third party network transactions.

You received a payment

You will need to file the appropriate forms if you received any of the following types of payments:

Did you receive a payment of mortgage interest or reimbursements of overpaid interest from individuals? Then you will need to complete Form 1098. Note that the reported amount can include points paid by the borrower at the time of purchase of a primary residence.

If you were involved in the sale or exchange or real estate, then you will need to file Form 1099-S. Such transactions could be for money, property, or services of any present or future ownership interest in any land. Residential, commercial, and industrial properties all fall into this category.

Let’s consider a different sort of reporting scenario. Maybe you forgave someone’s debt to you in the past year and now it’s time to account for it with the IRS. In this case, Form 1099-C needs to be filed for each debtor for whom the debt owed is $600 or more if the debtor is an individual, corporation, partnership, trust, estate, association, or company.

You are not required to file an information return

We’ve already outlined which 1099 you need based on whether you made or received a payment. Here are some situations in which you are not required to file an information return:

You are not involved in any business or trade matters.

You made a payment to an incorporated business, but it was not for medical and/or legal services.

The sum of all payments is less than $600 in the last tax year.

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